by Jim Kerr, CIO Chicago, Illinois

Monthly Archives: December 2015

That’s what a lot of parents (and experts) believe: Studying an instrument gives children an advantage in the development of their intellectual, perceptual, and cognitive skills. This may, however, turn out to be wishful thinking. Two new randomized trials have found no evidence for the belief. The IQs of preschoolers who attended several weeks of music classes as part of these studies did not differ significantly from the IQs of those who had not.

But that does not mean that the advantages of learning to play music are limited to expressing yourself, impressing friends, or just having fun. A growing number of studies show that music lessons in childhood can do something perhaps more valuable for the brain than childhood gains: provide benefits for the long run, as we age, in the form of an added defense against memory loss, cognitive decline, and diminished ability to distinguish consonants and spoken words.

Not only that, you may well get those benefits even if you haven’t tickled the ivories, strummed the guitar, or unpacked your instrument from its case in years. And dividends could even be in store if you decide to pick up an instrument for the very first time in mid­life or beyond.

The reason is that musical training can have a “profound” and lasting impact on the brain, creating additional neural connections in childhood that can last a lifetime and thus help compensate for cognitive declines later in life, says neuropsychologist Brenda Hanna­-Pladdy of Emory University in Atlanta. Those many hours spent learning and practicing specific types of motor control and coordination (each finger on each hand doing something different, and for wind and brass instruments, also using your mouth and breathing), along with the music­-reading and listening skills that go into playing an instrument in youth, are all factors contributing to the brain boost that shows up later in life.

Music Lessons Grows Your Brain

You can even map the impact of musical training on the brain: In a 2003 study, Harvard neurologist Gottfried Schlaug found that the brains of adult professional musicians had a larger volume of gray matter than the brains of non­musicians had. Schlaug and colleagues also found that after 15 months of musical training in early childhood, structural brain changes associated with motor and auditory improvements begin to appear.

Still other studies have shown an increase in the volume of white matter. Such findings speak to the brain’s plasticity—its ability to change or adapt in response to experience, environment, or behavior. It also shows the power of musical training to enhance and build connections within the brain.

“What’s unique about playing an instrument is that it requires a wide array of brain regions and cognitive functions to work together simultaneously, in both right and left hemispheres of the brain,” says Alison Balbag, a professional harpist who began musical training at the age of five, holds a doctorate in music, and is currently earning her Ph.D. in gerontology (with a special focus on the impact of music on health throughout the life span) at the University of Southern California. Playing music may be an efficient way to stimulate the brain, she says, cutting across a broad swath of its regions and cognitive functions and with ripple effects through the decades.

The Longer You Played an Instrument, the Better

More research is showing this might well be the case. In Hanna­-Pladdy’s first study on the subject, published in 2011, she divided 70 healthy adults between the ages of 60 and 83 into three groups: musicians who had studied an instrument for at least ten years, those who had played between one and nine years, and a control group who had never learned an instrument or how to read music. Then she had each of the subjects take a comprehensive battery of neuropsychological tests.

The group who had studied for at least ten years scored the highest in such areas as nonverbal and visuo­spatial memory, naming objects, and taking in and adapting new information. By contrast, those with no musical training performed least well, and those who had played between one and nine years were in the middle.

In other words, the more they had trained and played, the more benefit the participants had gained. But, intriguingly, they didn’t lose all of the benefits even when they hadn’t played music in decades.

Hanna-­Pladdy’s second study, published in 2012, confirmed those findings and further suggested that starting musical training before the age of nine (which seems to be a critical developmental period) and keeping at it for ten years or more may yield the greatest benefits, such as increased verbal working memory, in later adulthood. That long-­term benefit does not depend on how much other education you received in life.

“We found that the adults who benefited the most in older age were those with lower educational levels,” she says. “[Musical training] could be making up for the lack of cognitive stimulation they had academically.” She points to the important role music education can play, especially at a time when music curricula are falling prey to school system budget cuts.

Playing Music Improves Your Ability to Discern Sounds

Neuroscientist Nina Kraus of Northwestern University in Chicago found still more positive effects on older adults of early musical training—this time, in the realm of hearing and communication. She measured the electrical activity in the auditory brainstems of 44 adults, ages 55 to 76, as they responded to the synthesized speech syllable “da.” Although none of the subjects had played a musical instrument in 40 years, those who had trained the longest—between four and fourteen years—responded the fastest.

That’s significant, says Kraus, because hearing tends to decline as we age, including the ability to quickly and accurately discern consonants,­­ a skill crucial to understanding and participating in conversation.

“If your nervous system is not keeping up with the timing necessary for encoding consonants—did you say bill or pill or fill, or hat or that—even if the vowel part is understood,” you will lose out on the flow and meaning of the conversation, says Kraus, and that can potentially lead to a downward spiral of feeling socially isolated.

The reason, she speculates, may be that musical training focuses on a very precise connection between sound and meaning. Students focus on the note on a page and the sound that it represents, on the ways sounds do (and don’t) go together, on passages that are to be played with a specific emotion. In addition, they’re using their motor system to create those sounds through their fingers.

“All of these relationships have to occur very precisely as you learn to play, and perhaps you carry that with you throughout your life,” she says. The payoff is the ability to discern specific sounds—like syllables and words in conversation—with greater clarity.

There may be other potentially significant listening­ and hearing benefits in later life as well, she suspects, though she has not yet tested them. “Musicians throughout their lives, and as they age, hear better in noisy environments,” she says. “Difficulty in hearing words against a noisy background is a common complaint among people as they get older.”

In addition, the fact that musical training appears to enhance auditory working memory—needed to improvise, memorize, play in time, and tune your instrument—might help reinforce in later life the memory capacity that facilitates communication and conversation.

You Can Start Now

It’s not too late to gain benefits even if you didn’t take up an instrument until later in life. Jennifer Bugos, an assistant professor of music education at the University of South Florida, Tampa, studied the impact of individual piano instruction on adults between the ages of 60 and 85. After six months, those who had received piano lessons showed more robust gains in memory, verbal fluency, the speed at which they processed information, planning ability, and other cognitive functions, compared with those who had not received lessons.

More research on the subject is forthcoming from Bugos and from other researchers in what appears to be a burgeoning field. Hervé Platel, a professor of neuropsychology at the Université de Caen Basse-­Normandie, France, is embarking on a neuroimaging study of healthy, aging non­musicians just beginning to study a musical instrument.

And neuroscientist Julene Johnson, a professor at the Institute for Health and Aging at the University of California, San Francisco, is now investigating the possible cognitive, motor, and physical benefits garnered by older adults who begin singing in a choir after the age of 60. She’ll also be looking the psycho­social and quality-of-life aspects.

“People often shy away from learning to play a musical instrument at a later age, but it’s definitely possible to learn and play well into late adulthood,” Bugos says.

Moreover, as a cognitive intervention to help aging adults preserve, and even build, skills, musical training holds real promise. “Musical training seems to have a beneficial impact at whatever age you start. It contains all the components of a cognitive training program that sometimes are overlooked, and just as we work out our bodies, we should work out our minds.”

Sure, your friends might laugh when you sit down at the piano, but your brain may well have the last laugh.

Orbitz was the first company I was involved with that exceeded $1B in valuation. We achieved what they now call Unicorn status.

The Unicorn name came from an article from venture capitalist Aileen Lee in November, 2013, and from that point on, the name Unicorn has permeated the startup culture.

When I look back on the Orbitz experience I see a Company that did a lot of things right even though we were working in uncharted territory. A startup in the Midwest didn’t have the support infrastructure as our West Coast counterparts. In some ways a lack of support was a challenge, but in other ways it pushed us into innovating completely unique solutions that propelled us. Orbitz was one of the first commercial companies to implement RedHat Linux, we were one of the first to use JAVA as a programming language, and we were the first to implement Oracle RAC — all considered standard technologies now days. We were even running our development processes Agile-like a decade before Agile was coined as a term.

Those of you who are familiar with the Orbitz history know the challenges that company has faced over the years. For example, we launched June 2001… 3 months prior to the tragic events that happened on September, 11 2001. We started a DOTCOM during the recession and in the middle of the DOTBOMB. And we started a travel business that generated nearly all of its revenue from Airline ticket sales when many of our Airline partners were on the verge of bankruptcy…

So how did we survive and achieve Unicorn status?

First, I believe the main reason we survived is because we hired super smart, dedicated, hard working people that sincerely cared about our success. Our recruiting process was rigorous to say the least. Our CEO, Jeff Katz, personally interviewed every new-hire and our CFO, John Park, was incredibly scrupulous when it came to adding headcount and increasing operating cost.

At the time we viewed these strict policies negative because it put a lot of work on our staff. We saw the money come in from our Airline founders and at the time it was easy to think there was an unlimited bucket of money raining on us. However, as I look back I see the policies our executive leaders enforced is what ensured our survival. If they had wasted the money we received in stage funding like many businesses do now days we would have never survived the completely unexpected events of 9/11.

Secondly, we focused on our customers and continually tested the market. We released rudimentary functionality as we built the platform and continually tested with our customers. Ideas we thought might be good that weren’t overwhelmingly adopted by customers were scrapped. We averaged 2 out of 10 ideas that actually landed in production. This approach established a very loyal customer-base that stayed true to our brand.

First Orbitz Website June 2001

We carefully built our functionality starting with Air, then Car, then Hotel, then packaging. We didn’t try to build everything at once. We partnered with other suppliers until our platform was ready. This approach gave us cash flow early in our evolution that ultimately led to us surviving 9/11. We were 100% on our own after 9/11 and received zero funding from any third party source.

Unicorn Classification

I put Unicorn businesses into two buckets. There are the Hype businesses that quickly hire a ton of people and generate loads of press. And there are the Quiet businesses that grow strategically. In Chicago we have examples of both.

Groupon is a good example of a Hyped business. They grew fast, raised millions in funding, and benefited from an unlimited sea of press. Now they are on the decline. They recently laid-off 1,600 employees, closed operations in non-profitable areas, replaced many of their executives, etc. It is clearly going to be challenging for them to survive long-term.

Unicorn examples in Chicago that I classify as Quiet include Signal, who’s CEO is Mike Sands the former Orbitz COO, and Raise.com who is led by some young and smart entrepreneurs. I had never even heard or Raise.com until recently. They are a great example of a solid well thought out business. They are growing slow and steadily creating value for their customers without taking unnecessary risk or setting unrealistic expectations through overly Hyping their business. It is very impressive that they have achieved >$1B in valuation quietly in a small startup market like Chicago.

Understandably it is hard to take the quiet route when we see the Hyped businesses everywhere we look, but we need to keep in mind that the point of creating a company is to build a long-term viable organization. Investors are ultimately investing in and trusting the leadership team. Behind every penny is someone that trusts us to deliver what we promised. As entrepreneurial leaders we need to take that responsibility seriously and spend every dime like it is our own.

The Business Model

The WSJ recently released its Billion Dollar Startup Club list. About thirty-nine of these companies are platform businesses. The other 39 are linear. According to INC Magazine, investor confidence is approximately 25 percent higher in the platform startups than linear.

“Picking the right business to be in is the most important decision when starting a company.” Tony Hsieh, Zappos startup CEO

The key is to pick a business model that has a high potential with less competition. The platform business model, in my opinion, is the best for long-term sustainability. Zappos is a good example. They focused on selling a small subset of products (Shoes). As the online shopping world evolved their market share shrank opening them up to acquisition by Amazon. The Zappos business has continued to be financially pressured and they continue to struggle to achieve profitability. Amazon, is another example. Although they are a household name around the world they still struggle to achieve profitability. There platform business Amazon Web Services, however, is incredibly successful.

Platform businesses are typically based on consistent revenue model. Signing up customers for a monthly fee helps guarantee cash flow vs businesses like Orbitz, Zappos, Groupon, etc. that must attract customers every day to generate sales.

Accordingly, there are many traditional businesses such as Adobe who have pivoted from a linear product sales offering to a platform subscription. Microsoft is doing the same with Office 365. Constant monthly revenue is the key to long-term survivability. Products bring in big $$ in large spikes whereas platform subscriptions are more predictable.

Ok, we agree we need to build a platform. What comes first?

The hardest problem with building a platform businesses is that you need two components to be successful that are dependent upon one another. If Uber wants to grow, it needs more drivers to get customers and more customers to get drivers. Neither works without the platform behind coordinating both supply and demand.

When building a platform revenue doesn’t come until the platform is operational. If you build customers first based on Hype and then don’t deliver they will quickly become dissatisfied, leave and likely never come back.

I am a proponent of continuous A/B testing. Roll features out, test, evaluate and change. The sooner a working prototype is in the world the quicker you find what works and what doesn’t as well as start generating revenue. Uber started small, perfected their platform and then grew market by market, which is clearly why they are incredibly successful.

The problem with many platform businesses is they build what they “think” is right. By the time it goes out the door they often discover the customers don’t embrace the product as expected. This process has killed many tech businesses. They lose their valuation when the product doesn’t work as promised and they die on the vine. Releasing small features that attract subsets of customers enable a business to learn what customers want while generating revenue. Again, look at the Uber model. They started in a niche market testing, evolving and perfecting their platform to achieve worldwide recognition and valuation they have now.

Go Mobile First

Mobile is the key to capturing seamless engagement with end-users. Most want to start with a full-blown fully functioning, “perfect”, website, but I believe perfecting and testing an engagement model on mobile should be considered as the first priority.

A company doesn’t have to launch with both iOS and Android apps. There are countless examples of platforms only leveraging one operating system at launch and after becoming successful build the other. At Orbitz, we started with iOS apps. It was several years later before we introduced apps for Android. The key is to prove that you can get strong recurring usage on one operating system and then replicate that model.

Show me the money

Raising seed funding from family and friends is the easiest way to start a business. They invest in you without needing to understanding what you are doing. However, unless your friends are Warren Buffet and Bill Gates, it is hard to raise sufficient capital to build a Unicorn. Unicorns need to be valued over $1B, which is done by investment firms that comes through staged funding. Institutional Capital firms are necessary to raise material capitalization and help get to the coveted $1B valuation, establish a brand and beat others that may end up launching a similar concept.

People often think of a VC firm as organizations that take risks. This couldn’t be further from the truth. VC’s have investors that expect them to generate ROI for them. Ones that don’t generate a return for their investors don’t last long. Institutional capital firms look for a strong management team, a product they can understand and a business model that can generate revenue.

Conclusion

At the end of the day the people are the key to success no matter what you are doing. Surround yourself with only “A player” people. When thinking about people I follow the saying, “Hire Slow and Fire Fast.” Use the core team to develop the business Idea with a strong slant to creating a platform business. Start with mobile development first and test small features and start generating cashflow. Use the A/B testing experience to refine the business plan. Use family, friends, goFundMe or other sources to get startup funding. Then only when having a mature enough business model approach Institutional Investment firms. Finally, work through staged funding steps exceeding all objectives at each stage and achieve Unicorn status.